Strategic Averaging Method (SAM)

This is a Guest Post by Mr. Mike Vinas of COL Financial Group, Inc. where SAM (Strategic Averaging Method) is explained in detail. Enjoy the article!

Have a Plan for Profit

Every success starts out with careful planning. A rock band holds rehearsals before their gig. A company conducts annual strategic planning sessions to set out projects and improvements for the next year. An engineer works on a blue print before buildings are built. We always need a plan. Even in the Stock Market.

Making money in the Stock Market requires a strategy, a well laid out plan that we need to stick to no matter what.

We have to have a plan for profit.

Without a plan we become driven by emotions, and in the Stock Market emotions won’t make us any money. Emotions will cause us to buy when not to buy and sell when not to sell. In addition, emotions lead us also to buy the wrong stocks – penny stocks.

We’re like on a treasure hunt without a treasure map. Our ship just goes where the wind takes us and we just go with it, even if it leads us to choppy waters, pirates, or inside a whale’s stomach.

I remember talking to an investor who bought a penny stock. She asked me, “what do I do now with this stock, now that it’s going down?” I asked her first, “Ma’am, why did you buy the stock in the first place?” She responded quite embarrassed, “I don’t know. I just saw it going up, so I bought.”

She didn’t have a plan at all. She simply went with what she was feeling without even considering the company she’s buying. So I said, “Ma’am, you should be buying good companies. You can choose to hold on to it and wait until maybe one day the price goes up, or you can sell, take the loss and buy good companies with the money you have left.”. Eventually, she’ll make up what she lost, investing in good companies.

If we have a plan, we can avoid such costly mistakes.

With a set plan we’re guided by an effective system and not emotion.

With a plan, we set out knowing where to go, how to get there, and what to avoid.

Our journey to our destination becomes smooth sailing.

There’s an old saying that goes, “if you don’t know where you’re going, any road will take you there. “ But for us, we know where were going. We’re going to be millionaires! So here’s the treasure map to getting there:

SAM’s House Rules

Some of you have already been following this for a while now. So for some, this a friendly reminder, but to our new TrulyRichClub members, it’s a house warming gift.

SAM is short for Strategic Averaging Method – this is the passive long term investment strategy we follow to make millions in the Stock Market. Especially in periods like today, where we’ve been seeing the Stock Market moving sideways, this is the easiest way to make money in such a market scenario.

Here’s how it goes:

1. Invest small and slowly

Invest comfortable amounts. Don’t invest big chunks of money all at one go.

Invest small amounts regularly to get good opportunities to buy at low prices when stock prices are down. In other words, invest small amounts to get good average prices overtime. This concept is known as Cost Averaging.

Like Bro. Bo suggested before, if your money is smaller than P300,000, divide your money into 6 parts, and invest each part for the next 6 months. On the other hand, if your money is more than P300,000, divide it by more than 6 parts. Perhaps by 12 parts and invest each part regularly.

2.Buy at Buy Below prices

For each SAM stock we recommend, we have what we call a ‘Buy Below Price’. This tell us when to buy that stock. As long as the price of that stock remains lower than our Buy Below Price, we continue to buy regularly (every month, every quarter, or every week).

You can check the Buy Below Prices of our SAM stocks below.

For example, one of our SAM Stocks is Ayala Land Inc. (ALI) and it’s Buy Below Price is P16.73, while its current market price is P15.90 (As of November 9, 2011). This means that as this price we can buy shares of ALI.

3. Stop buying when prices go beyond our Buy Below price.

When the price of a SAM stock goes higher than our Buy Below Price that means we should stop buying. However, if the prices of our SAM stocks go back lower than our Buy Below Price this gives us a signal to start buying again.

We want to be buying at Buy Below prices because we want to buy at attractive prices or valuations. On the other hand, we stop buying when prices go beyond our Buy Below Price to avoid buying at high priced valuations.

Going back to our example earlier of ALI with its Buy Below Price at P16.73, if at one point the price of the stock goes up to P16.76. This would signal us to stop buying such shares for it has crossed beyond our Buy Below price.

However, if ALI’s price goes back to P15.80, then this means it once again below our Buy Below price. This means, we can buy again shares of ALI at that price.

4. Wait for the Target Price. Sell when the Target Price is hit.

The Target Price is a projected future price of a stock that we believe the stock will go to or go close to given the performance of the company. This price is used by Brokers to estimate the potential growth of a company considering a 1-year point of view.

So after accumulating shares at Buy Below prices, all we have to do now is wait.

Like tea that we steep, or wine that we store over time, we wait patiently and let time coupled with the company’s consistent good performance drive up the price to our Target Price.

As soon as the market price of our SAM stock hits or gets close to our Target Price, we sell. This means that we’re selling our shares and we’re locking in our profit. By this time, we’ve already made money! We’re one step closer to becoming millionaires!

Now using the same example of ALI with its Target Price of P19.75, if the current market price goes up to P19.75 or close to that price, then this would raise our sell flag signifying that we should already sell.

5. Reinvest to other SAM stocks.

Use the money you made from selling a SAM stock at our Target Price and reinvest it, buying shares of our other SAM stocks that are still priced below are Buy Below Price. By doing this you’re compounding your previous profit with the potential profit you’ll be making with this new SAM investment. It’s like rolling-over a time deposit in the bank.

I’ll talk about the concept of Compounding on our next issue. This is another key to making our millions in the Stock Market.

Stick to SAM’s System

This is our treasure map to the millions in store for us. We just need to follow it, follow it to the dot. Follow the system and you’ll make money.

It’s that simple.

The only thing challenging about it is the discipline it requires. So choose to be disciplined and stick to the system, stick to SAM’s system no matter what, even in times of crisis.

One day your discipline will be rewarded.

Look forward to that day! – by: Mike Vinas

Thanks & God bless,

P.S. 1. COL Financial, Inc. is the recommended Stock Broker of Bro. Bo Sanchez to all his Truly Rich Club members. The TrulyRichClub is a membership Club that he had created to help people achieve Financial Wealth and Spiritual Abundance. It is a private group of individuals who have decided to do something about changing their beliefs and thinking—to gain the abundance mentality they need to change their lives forever. Bro. Bo provides them with the right tools, principles, and strategies to grow in their financial and spiritual life.

P.S. 2. Wanna join us at the ‘Happiest Place on Earth‘? We do a meet and greet with Bro. Bo every Sunday at the Feast PICC. Please feel free to join us after the 3rd session. For Feast schedules in PICC and other areas around the metro, pls refer to the right side of Kerygma Family homepage.

8 Thoughts on “Strategic Averaging Method (SAM)”

Keep tax rates in mind when purchasing stocks.
When you purchase a share and you keep it for more than
a period of one year, you are going to be taxed at the rate of a
long term capital gain. However, if you sell the stock before the one year is finished, you
are going to be taxed at the normal tax rate.

Hi mike just like to ask re my portfolio if you could explain coz I didnt understand why I still loss even if the market price is higher than the purchase price. Just for example I bought BDO for 71.55 then the market price went up to 73.3 but still I loss 3.94. Can you explain how it happens? Thanks.

It’s never too late to invest in the stock market. You still have about 7 yrs before you retire so that’s still a long way to go. However, there are other types of investment which you may want to pursue other than stock investment. If you want to do 1 on 1 coaching with a Financial Advisor, I can pair you up with one.